Yesterday I was watching Good Doctor when a familiar scene presented itself- the cast of characters decided to have a celebratory lunch. Where would they go? Of course they would eat at their local franchise restaurant. While chatting away they prominently ate their food, flashing the company’s logo every time they lifted a cup or took a bite of their subs (I will let you guess which restaurant I am referring to). I have seen this many a time, so it was not shocking. But it did make me remember something I had read a while back, that such product placements in dramas occur because they do not have commercials. And then it hit me – as an online watcher I have no idea if dramas actually have commercials. And then another thing hit me (no, unfortunately it was not a big ole bear hug from So Ji Sub), that without commercials dramas would suffer from lost advertising revenue oppurtunities (when commercials exist and all)? And then it hit me- yes, I am in fact a financial analyst and MBA student. I tend to think of revenue…a lot. Nerd!

So, what else would I do with all of the dork like self-realizations but write a post (of course)! You may already know the following or this may be head scratching news or insightful bits of information for you. I cannot claim to be an expert of anything in the following post by any means (I am a Korean Drama fan, much like yourself), I am relaying what I have read through investigation based on my own curiosity, and have added references to where I accessed the information. I do have a focus on finance, and do it for a living. So I hope it is at least informative (and not just me rambling about revenue and business strategy). Cheers! [warning- gratuitous use of Siwon GIFs from King of Dramas ahead]

So there are commercials?!
Of course! How else would broadcasters make their money you… silly…um…silly me! There are usually 3 commercial breaks during a drama broadcast, lasting about 8 minutes in aggregate.

That is great, the broadcaster is making money so they can keep airing dramas! Yay us?!

Well, yes and no.

Yay the broadcaster, who is making ad revenue. But nay the production company, which sold the drama airing rights to the broadcaster to begin with. You see, making a Korean drama “in house” (or the broadcaster assuming all production costs) is far more expensive than picking up a show that is made by *cough funded cough* by an independent production company. These independent production companies are behind 80% of the Korean dramas that are broadcast (as of 2013). Of course the broadcaster is paying the production company for the show (a set amount mind you), so it is not a definite nay by any means (and should actually be a yay). Instead it is sometimes a resounding nay for the people the production company are supposed to pay….

Wait! So the production company is being paid, so who is not getting paid!

“Nearly half of the budget for the drama was spent to cast a couple of actors playing leading roles,” said a KBAU official familiar with the case. “My understanding is that in this spending structure he (the boss) found it difficult to pay others so he fled.”

“An independent drama producer starts shooting normally on a tight budget given by the broadcaster. A large portion of this is paid to a handful of leading actors,” Ryu said in a separate media briefing on the issue. “The producer usually needs extra money to fully compensate others. To that end, the firm sells the drama in various ways, but this is not always successful.”

The preceding quotes are referring to the drama “Rascal Sons”, which aired this past spring on MBC. Rascal Sons was produced by an independent company, To Be Enterprise (TBE). The CEO of TBE, after realizing his business model was heavily flawed, pocketed the cash and fled. Basically – he budgeted half of the production monies on two people in order to be picked up by a major broadcast station, MBC in this case, and then realized he had no money left over to gain a profit and pay out all expenses.

Unfortunately, the ones that suffer in this mess are the people who put on the show – the actors and actresses, the crew, the writers and pretty much anyone that expected a paycheck from the company that decided to put on the show in the first place. Unfortunately this is not an isolated incident.

Faith, the last drama (unfortunately Heirs has not yet premiered) featuring Lee Min Ho had the same problem. Sadly, the Producer committed suicide in the midst of the legal fallout from the nonpayment of the cast and crew.

Sadly, this is a self-propagating cycle. Independent production companies will go after top talent in order to attract major broadcasters. The broadcasters will pick up the dramas that have top talent, but at a tightly budgeted price. The production company, realizing they have to pay the top stars mega bucks, will soon realize their business model is flawed (but hey, they are on air! So all is not lost. Wait…it kind of is) and face the reality of not being able to pay the sound guy or the editor. It is a win-win for the broadcasters but a loose-loose for everyone that is involved in making the drama if the production company is not turning a profit.

The major broadcasting stations (MBC, SBS, KBS) have pushed for having all independent production companies they work with assume an insurance policy that basically makes sure the cast and crew are paid. But with the assumption of insurance comes an increase in expenses for the production company, which will in turn drive them to seek higher purchase (or licensing as it is often referred to) prices for their dramas if they want to remain profitable…

Of course this is not the rule. There are independent producers that pay their talent and their crew while retaining a decent profit margin. But the fact remains- this is a flawed system. As long as independent production companies will assume low budgets set by the purchase prices of their productions there is the threat of nonpayment. After all- robbing Peter to pay Paul leaves Peter with a sad look on his face and a tin can. Just saying.

I am a star! I am getting paid! But I have to work 20 hours a day because of a live shoot…

Assume you are an actor or actress starring in a drama. You are getting paid. Life is great…wait a minute! Nope, you are probably going to need IV drips and all sorts of things to get through the day. Why, you ask. Well, you will probably have a hell of a time keeping up with your schedule – after all, you have just entered the live shoot.

What the what what is a live shoot you ask?! Well, I will give you the explanation from Drama Beans, the expert in all things Korean Drama:

“Miniseries and special production dramas typically begin filming a month or two in advance of their premieres, although there are some that begin filming several more months before that (reasons: special effects, location shoots, production considerations like large-scale battle scenes). I’m excluding daily dramas, long-running serials, and sitcoms from this because those can have different schedules.

This head start allows dramas to have a few episodes in the can before the episodes hit the air, but the demands of production can catch up mighty quickly after that, and soon shows will be filming episodes the week they air. Two episodes per week means that each episode gets a few days for filming and editing, with not much room for extensive re-shoots and the like. Sleep deprivation is a given; mistakes a distinct possibility.”

As dramas air and as they achieve a fan base, the schedule becomes tighter and tighter. They respond to fan feedback (and by they I mean the writers, but with the consent of the production team, of course) and change it up. The cast and crew are suddenly in a rush to film the latest script in time to get it on air. After all, each episode needs to see the editors’ room and be readied for production – and some of these episodes are literally filming only a few (or couple- or one in the worst case scenario) days before they air. Again, the business side (or money-money-money) comes into play, as described by Sensei Drama Beans:

“The issue can get complicated if you look at all the various factors involved in bringing drama production to its current state — it’s not just a matter of saying, “Well, just start shooting sooner then.” There’s the fact that increasingly, drama series are being produced by outside production companies and then licensed to the broadcasters, rather than being developed in-house as in earlier days. With broadcasters a step removed from the process, money seems to float to the fore as the big driving force of everything — everyone wants everything done fast, and as cheaply as possible.

In other words, it is still about the cash. And the business.

So, you have rained on my fun drama parade. What do you have to say for yourself?

I am sorry, but such is the business side of what we both enjoy. For me dramas are not about the money game. The system is flawed, the financing is flawed, but let the people who are involved in that line of business sort it out. I was hoping to be informational, but I still love me some Korean dramas for the story they tell, but sometimes I just have to put my analyst hat on. Let’s rundown the issues first, then get to the conclusion of my revenue filled rant:

The issues

A cycle of do more for less – that does not account for realistic production costs

Broadcasting stations seek out the lowest licensing costs with the highest revenue returns (think top actors for a great price!)

Independent production companies that are unable to realistically budget for actual production costs, all while trying to attract top talent at the expense of 50% of their production budget

Writers and producers that live for fan feedback – which is not exactly horrible in principle. Only in execution.

Broadcasting stations responding to cast and crew nonpayment with requirements for insurance clauses – without necessarily accounting or consenting to the higher purchase prices for independently produced dramas.

Yep- I frown on the business side, but it does not detract from my over all love for this type of show. Many businesses are flawed up the…well, you get the picture. But when a business that churns out engaging stories is flawed there is a certain amount of questions one must ask themselves. And then they were all answered with….

Very informational & educational indeed! Kudos, Lore! *wild applause* And that you managed to make this a fun read too? Wow. You should teach financials in university! I bet your classes would be way funner than what’s currently getting served up! ;D ESPECIALLY if you throw in Si Won gifs on a regular basis! ^.~

Thanks! Great idea in regards to teaching…maybe once I have my Masters I can find a teaching job and use King of Drama GIFs to teach the world about finance and accounting…that would be awesome, ahhhh dreams *insert day dreaming Si Won GIF here * 🙂

This was a really good article. I’ve been watching k-dramas for years now, and have been well aware of their ridiculous system for most of that, but it still makes me angry, lol. Which is so irrational; what do I have to be angry about? I still get to watch the dramas I want to watch. But knowing that actors really do end up on IV drips because they’ve barely eaten or slept in weeks is just too much. I can’t even imagine what it’s like for the crew! Unfortunately for Korea, they don’t have the same workplace (and humanitarian) rights as some other countries do so they can’t actually do anything about it.

“Unfortunately it was not a big ole bear hog from So Ji Sub” LOL. Thanks for the random, inside joke. It makes me feel in-the-know. That bear hug was probably my favorite part of last night’s MS episode.

If the Korean Actors Labor Union is like the U.S. Actor Labor Unions the contracts should include: minimum salaries (negotiated rates, overtime, extra pay for additional duties, free housing or per diem on tour); work rules (length of day, breaks, days off, safe and sanitary conditions). Such a shame because they are done so well and the actors/actresses are a big part of that. Makes me sad to know the truth : (

That was such an informative and interesting post. You must have put a lot of effort into your research, Lore.

For those who are further interested in how production companies work, I recommend the drama, Worlds Within (aka The World That They Live In) starring Hyun Bin and Song Hye Gyo. I saw the behind the scenes of how drama-making works, although I don’t think that they are working for an independent broadcasting company, but for an actual TV station.

Also, all this business of independent companies reminds me of the backstory of the drama, Birdie Buddy starring UEE, Lee Da Hee, and Lee Yong Woo. The drama was supposed to be aired by MBC, but it was dropped from the lineup in 2010. After a couple months of struggles with the independent production company on edge, it was finally picked up by tvN. Imagine putting in all that hard work and then it never even gets broadcasted or put on the shelf. There were also several articles that speculate that UEE was the reason why the drama was not picked up since UEE was still relatively unknown, a newbie actor, and more known for being in the After School girl group. In desperation, the production company started putting up 30-minute long trailer on Youtube in hopes that a broadcasting company would reconsider it. After it broadcasted on TvN, I wonder if anybody else, besides the leading actors, got paid.

Really insightful, Lore! Scary and sad… but insightful! (I suppose that’s the price for looking into how they make the sausage.) I hope they manage to… even things out, i guess? Get a better idea of what the actual cost is, have reputable productions companies for workers at least to choose over fly-by-night places. (I’m not giving the broadcasters any credit here — I don’t see them choosing quality over cost, unfortunately.)

I feel like the k-drama industry is still fairly young. Hopefully they’ll find their feet.